Business Reporter

A boost to business confidence failed to give the Australian dollar any tailwind on Monday, despite a slightly improved outlook for the domestic economy and the last of the big four banks calling the end of the rate cutting cycle.

With threats of a belt-tightening budget on Tuesday looming, a surprise boost in business confidence, from National Australia Bank's monthly business survey, did little to rally the local currency.

The Aussie was trading flat for the session at US93.62¢ in afternoon trade, staying within a tight range the entire day.

A slightly more positive jobs market helped business confidence rise two points to six in April, after falling three points to four in March.

Advertisement

Upon release on its monthly survey, NAB also revised its official interest rate outlook, dropping their call of a 25 basis point cut in November and keeping steady its forecast for rate rises late next year.

The move made NAB the last of the big four banks to call the end of the current rate cutting cycle, which has seen the Reserve Bank of Australia's cash rate drop 225 basis points since November 2011.

However, all was not rosy in NAB's business survey, despite the dollar's muted reaction.

Business conditions slumped one point to zero, and forward orders dropped eight points from six to negative two.

"Businesses are generally better at telling you how things are going right now, or what their order books are looking like, and that means forward orders and business conditions are generally more reliable than business confidence," Deutsche Bank chief economist Adam Boyton said.

"Forward orders slumping 8 points; that tells you that the economy could well be slowing in the second half of the year."

Tuesday's budget has the potential to move both the Australian dollar and the rates market, NAB senior economist David De Garis said.

"Through a likely sea of wire coverage given to multiple year cuts and deficits, we'll be focusing on what it means for the economy over the next one to two years," Mr de Garis said.

"We look for an all up fiscal contraction of ½ per cent of GDP for 2014-15 behind a Budget deficit of $29 billion, down from a mid-year MYEFO projection last December of $33.9 billion."